Department for Business, Innovation and Skills
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New transparency rules launched for extractive industry payments

The UK’s implementation of the Extractives Industry Transparency Initiative (EITI) is launched.

Businesses and NGOs working in the mining, oil and gas industry joined forced with the government yesterday to mark the launch of the UK’s implementation of the Extractives Industry Transparency Initiative (EITI).

The Initiative, which was set up to increase transparency, improves the way revenues from oil, gas and minerals are managed and makes sure that people across the world share in the economic benefits of the natural resources in their country.

Business Minister and UK EITI Champion, Jo Swinson, committed to working closely with industry and civil society to implement the EITI in the UK. In her keynote speech the Minister announced the formation of a stakeholder group with representatives nominated by the CBI, Oil & Gas UK and civil society organisations, which will help reach a future agreement in implementing the measures in the UK.

Business Minister Jo Swinson said:

Oil, gas and mining can, if well managed, deliver precious economic benefits to the populations of developing countries. Too often the assets from resource-rich countries in the developing world are not benefitting local people. At the G8 summit last month, more and more countries across the world recognised how vital transparency and accountability are in these industries.

In Britain, we have already seen some of the biggest oil, gas and mining companies voicing their support of this important initiative. Today’s commitment by industry and NGOs to work together is a big step. This will result in greater transparency, help build a stronger economy and means that people around the world benefit fairly from the natural resources of the countries in which they live.

The launch event today follows the announcement by the Prime Minister in May that the UK intended to sign up to the EITI. In addition, at the G8 last month, the Prime Minister also secured commitments from Russia and Japan to encourage their national companies to support the goals of the EITI, and from Germany to test the EITI in a pilot region.

Publish What You Pay International Director Marinke van Riet said:

Publish What You Pay welcomes the UK government’s decision to become an EITI member and to be more publicly accountable to UK citizens for its stewardship of our country’s non-renewable natural resources.

We look forward to a meaningful UK process under the EITI’s recently strengthened transparency rules, which apply equally to developed and developing countries. The voluntary EITI usefully complements oil, gas and mining companies’ mandatory country and project-level reporting of payments to governments that US and EU law now require, which is becoming the new global standard.

Oil & Gas UK’s economics and commercial director Mike Tholen said:

The UK offshore oil and gas industry pays many billions of pounds a year in direct taxes on production. Oil & Gas UK will be co-ordinating engagement on the UK’s implementation of the Extractives Industry Transparency Initiative on behalf of the UK offshore oil and gas industry and will seek to ensure the benefits of EITI are achieved in the most cost effective way.

Under the EITI, extractives companies operating in the UK would report material payments to the UK government, totalling billions of pounds, who in return would also report the receipts it received. The payments of tax, licence fees and other receipts would be disclosed in reports conforming to the EITI standards.

The EITI multi-stakeholder group formed today will now work with government to decide how the framework for reporting will operate, the scope of companies included and how payments are disclosed.

Last month the European Union formally adopted Chapter 9 of the EU Accounting Directive. This robust set of extractives transparency rules advocated by the UK government will ensure those in the gas, oil and mining industry report the payments they make to governments in all the countries they operate in.

Notes to editors

1.The EITI launch event took place on Tuesday 9 July 2013. The audience included private sector representatives, civil society organisations, officials and representatives from the International EITI Board including EITI Chair Claire Short.

2.More information on the EITI can be found at http://eiti.org/

3.In order for the UK to apply to the EITI Board and be accepted as candidate, under EITI rules, it will need to:

  • issue an unequivocal public statement of its intention to implement the EITI
  • commit to work with civil society and companies on implementation
  • appoint a senior individual to lead on the implementation and
  • establish a multi-stakeholder group to oversee the implementation (comprising business, civil society and government). The multi-stakeholder group has to agree and publish a fully-costed work plan, containing measurable targets, and a timetable for implementation and incorporating an assessment of capacity constraints

4.Once accepted as a candidate, under current EITI rules the UK will have 18 months to publish an ‘EITI report’ that reconciles what companies say that they pay in taxes, royalties and signature bonuses, with what government has received. The UK would have two and half years to reach compliance. To do this it would undergo an independent validation to check that it is complying with EITI rules.

5.If the international EITI Board considers a country to have met all EITI requirements, the country will be recognised as EITI Compliant.

6.The full commitments on extractives received under the UK’s G8 presidency include the following:

  • the US has adopted legislation requiring certain publicly traded extractives companies to report their payments to governments around the world
  • the EU Accounting and Transparency Directives will introduce equivalent standards for EU Member States. EU G8 members will quickly implement the EU Accounting and Transparency Directives. These will require mandatory reporting of payments to governments by all listed and large unlisted extractive companies in the EU to all governments, and are consistent with section 1504 of the US Dodd Frank legislation and the new EITI standard
  • the US, UK and France will seek candidacy status for the new EITI standard by 2014
  • Canada will launch consultations with stakeholders across Canada with a view to developing an equivalent mandatory reporting regime for extractive companies within the next two years
  • Italy will seek candidacy status for the new EITI standard as soon as possible
  • Germany is planning to test EITI implementation in a pilot region in view of a future candidacy as implementation country
  • Russia and Japan support the goal of EITI and will encourage national companies to become supporters

7.The latest Office of National Statistics figures for oil and gas receipts for 2011/12 shows total revenues of £11.2 billion.

8.The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’, published at Budget 2011:

  • to create the most competitive tax system in the G20
  • to make the UK the best place in Europe to start, finance and grow a business
  • to encourage investment and exports as a route to a more balanced economy
  • to create a more educated workforce that is the most flexible in Europe.

Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.

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